Making the Grade – Microfinance for Education

Monday, September 13, 2010

Funding poor students could be the next big thing in microfinance.

“LENDING to get a student through college is a far better way to fight poverty than making small-business loans,” says Ganhuyag Ch. Hutagt, until recently boss of XacBank, a Mongolian microfinance lender. Graduates are more likely to take jobs that lift them into a far higher income bracket-which is why, five years ago, XacBank started offering higher-education loans, typically between $700 and $900, to the country’s more than 160,000 students.

Finding new ways to fund poor students in emerging markets has become a hotbed of innovation. Vittana, founded three years ago by Kushal Chakrabarti, a former software developer at Amazon, is raising loans for students in five countries, with more soon to follow, through “peer-to-peer” online lending, mostly by people from rich countries. Qifang, founded three years ago, is doing much the same in China, raising money online for Chinese students from Chinese lenders. Vittana is growing at over 30% a month; and Qifang has already lent over $1.3m.

Source: The Economist (link opens in a new window)